CMS Announces a Proposed Significant Payment Reduction for ESRD Services

July 3, 2013

On July 1, 2013, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule (Proposed Rule) regarding the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) for renal dialysis services furnished to beneficiaries on or after Jan. 1, 2014, and also regarding the ESRD Quality Incentive Program (QIP).

CMS projects that the updated calendar year (CY) 2014 ESRD bundled market basket increase will be 2.9 percent, which is reduced by an estimated multifactor productivity (MFP) adjustment for CY 2014 of 0.4 percent, for a projected update of 2.5 percent to the ESRD PPS base rate in CY 2014.

Section 632(a) of the American Taxpayer Relief Act of 2012 requires the Secretary of the U.S. Department of Health and Human Services to make reductions to the ESRD PPS base rate to reflect the Secretary’s estimate of the change in the utilization of ESRD-related drugs and biologicals by comparing per-patient utilization data from 2007 with such data from 2012. This adjustment results in an overall 12 percent reduction in Medicare payments for CY 2014. The Proposed Rule seeks comment on whether this change should be phased in over more than one year.

As a result of the application of the ESRD bundled market basket update reduced by the MFP adjustment, the wage index budget-neutrality adjustment and the drug utilization adjustment, CMS projects the proposed updates for CY 2014 would decrease total payments to all ESRD facilities by 9.4 percent compared with CY 2013. CMS estimates that the overall payment decrease would result in a $190 million savings to Medicare beneficiaries in the form of lower coinsurance payments. In addition, the revision to the ESRD PPS would result in an approximately $780 million decrease in aggregate ESRD PPS expenditures for CY 2014. This decrease reflects a $1.02 billion decrease in expenditures related to the 12 percent drug utilization adjustment, less a $210 million increase from the payment update and a $30 million increase due to updates to the outlier threshold amounts. In a recent report, the Office of Inspector General of the U.S. Department of Health and Human Services estimated that Medicare and its beneficiaries could have saved $529 million in connection with the administration of the erythropoietin stimulating agents Epogen and Aranesp and the iron supplements Venofer and Ferrlecit during CY 2011 if the ESRD PPS base rate had been adjusted to reflect current utilization of anemia management drugs.

In the Proposed Rule, CMS also:

  • Proposes a composite base rate of $145.20 for ESRD facilities that are reimbursed under the blended payment during the ESRD PPS transition period. This increase represents a 2.5 percent increase over the 2013 composite base rate and is based upon the market basket update adjusted by the MFP adjustment.
  • Proposes changes to the outlier policy for CY 2013 by revising the fixed-dollar loss and Medicare Allowable Payment (MAP) amounts, which are used in calculating a case’s eligibility for outlier payments. For pediatric patients, the fixed-dollar loss amount would increase to $54.23 and the MAP amount would remain at $38.65. For adult patients, the fixed-dollar loss amount would decrease to $94.26 and the MAP would decrease to $52.45. CMS believes that the changes in the outlier policy will allow more cases to qualify for outlier payments.
  • Announces its intention to implement ICD-10-CM and provides a crosswalk from ICD-9-CM for codes that are eligible for the comorbidity payment adjustment.
  • Sets forth proposed requirements for the ESRD QIP in payment year (PY) 2016 by continuing, and in some cases expanding, a number of the PY 2015 ESRD QIP measures and adding five new measures, including reporting of the following measures: (a) the proportion of dialysis patients for whom a facility obtains informed consent for anemia management; (b) certain data related to the provision of iron therapy to pediatric patients; (c) the proportion of patients with hypercalcemia; (d) dialysis-related infections to the Centers for Disease Control and Prevention’s National Healthcare Safety Network; and (e) certain data regarding patient comorbidities.

The Proposed Rule will be published in the Federal Register on July 8, 2013. The display copy is available here. CMS will accept comments regarding the Proposed Rule through Aug. 30, 2013.